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Finance ministry pushes departments to frontload investments as capex lags

 

By Shubham Batra

NEW DELHI – The finance ministry has asked key infrastructure-related ministries to frontload investments as capital expenditure has lagged the targets in recent months, a finance ministry official said.

"You are very soon going to see a ramp up in capital spending. We are constantly making a push for investment and asking ministries to spend," the official told Informist. 

Finance Ministry Officials Met Infrastructure-related Departments And Asked Them To Step Up Spending On Projects Identified Under The National Infrastructure Pipeline.

Officials from the finance ministry recently met those from infrastructure-related departments and asked them to step up spending on projects identified under the National Infrastructure Pipeline, the official said.

The Budget for 2021-22 (Apr-Mar) provided a major push for capital expenditure, by increasing allocation 30.5% to 5.54 trln rupees. However, capital expenditure has been slow so far this year.

According to data from the Controller General of Accounts, capital expenditure was only 1.28 trln rupees in Apr-Jul, up 14.8% on year. But in July, capital expenditure contracted 28.2% to 169 bln rupees.

Barring road transport and highways and railways ministries, capital expenditure by most big ministries has been lagging.

In Apr-Jul, capital expenditure by road transport and highways and railways ministries rose 66.3% to 768 bln rupees.

The two ministries accounted for about 60% of the capital expenditure in Apr-Jul, even when their share in the total capital outlay of the government is only 39%.

In the recent meeting with the finance ministry, some ministries pointed to lack of projects that needed immediate cash funding, the official said. The finance ministry has shared a note on update on capital spending by ministries with the Prime Minister's Office, the official added.

As a practice, spending from capital expenditure is now routed to viable projects available for funding under the National Infrastructure Pipeline, which has projects worth 112 trln rupees, the official said.  

The finance ministry will meet officials of various key departments again on Friday to nudge them to frontload spending, the official said.   

The Budget for 2021-22 has also kept aside 440 bln rupees for projects or departments that show good progress on capital expenditure and are in need of more funds.

Although the government's spending is only a fraction of the overall investment, it has become all the more important in the absence of private capital investment.

In 2020-21, nominal gross fixed capital formation contracted 8.6% despite a 26.5% increase in the government's capital expenditure.  End

Edited by Mainak Moitra

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